Australia’s No 1 insurer QBE is like dynamite. The giant international insurer, which has been blowing analysts away with spectacular profits for the past two years, last week reported a 2005 net profit of just over $1 billion – an impressive 27% jump on the previous year’s results.

Beating the $1 billion mark was a huge milestone for the company, which only five years ago was in dire straits after suffering massive liabilities as result of the September 11 attacks.

QBE CEO Frank O’Halloran says the group’s performance in 2005 has been even more impressive given the disastrous year for the global insurance industry.

“The substantial increase in net profit after tax and the improvement in insurance margins were significant achievements considering the insurance industry experienced its worst year on record for catastrophic losses,” he said.

But he doesn’t want to incur those kinds of losses again. QBE has decided to pull out of covering certain risks on the Gulf of Mexico coast and to raise rates on offshore oil rigs.

Mr O’Halloran also says overall premium rates for the group are expected to rise by about 4% this year, with higher rates for catastrophe-exposed classes “more than offsetting slight reductions for other businesses, particularly liability insurance”.

“Subject to unforseen circumstances”, he expects to report an insurance margin of 16-17% for 2006, and net earned premium growth of about 12.5%. “We also expect net profit after tax and diluted earnings per share to increase by more than 10%.”

One place where QBE would dearly love a bigger market share is in its home market, and the results announcement brought the consolidation speculation out into the open again last week.

While Mr O’Halloran says the company isn’t in discussions with any local competitors, it is “keen [to acquire a competitor], but we are only keen at the right price and under the right conditions”.

Insurance profit before tax increased 39% to $1.2 billion, despite net claims from large catastrophes of $515 million compared with $320 million the previous year.

Gross written premiums were up 7% to $9.4 billion and net earned premium increased 9% to $7.3 billion.